tirsdag den 16. december 2008

It is time for me to write the final piece for 2008 - I have under the circumstances had excellent year in the fund, but somehow I am totally exhausted watching the S&P go up-and-down 100 points every day.... and today I went to the funeral of my dear friend Jens.....and it made me realise that I need to take some time of - enjoy the good year - and let markets be markets as the "lottery" circus continues into the year-end.

Fed was decisively desperate - "all in" poker style as my friend Jesper calls it....and Bless them, I wish them luck..... hope is good, especially considering the year we are going to face in 2009 with rising unemployment.

I will keep a few positions - would not be able to sleep if not - so.... long puts in STOX50 still, bought some EUR p USD c @ 1.4050 ish today...., and our allocation model still maintains the exposure as stated before.

Finally, let me wish you all a Happy Holiday, may the presents be big and expensive for you all.

No prior analogy historically will work (because this is different, very different)

Conclusion

Zero visibility from here - main topics for 2009 being:

Negatives:

Unemployment - we see >10% in both Europe and the US (see more under overall conclusion) - and losing your job makes people STOP ...stop living, stop buying, stop thinking... making it binary - while in the Ivory Tower of the banks they talk like its continues process - its not! You lose your job, you lose it...

Low oil prices - the impact could be massive on Social tension, geopolitcal risks and earnings power for EMG countries and companies. No one seems willing and able to imagine <20>

China growh makes it to zero - A story I have carried around since my Asia trip - seems banks now overtaking me..all of the sudden China not growing is the new Black, but even with growth at 3-5% China will be losing jobs, millions of jobs...and the 2009 will be real test for the THIRD WAY (you all know what happened to the 3rd way of Clinton, Merkel and Clinton)

Positives

Psychology so negative it can work positively for the market. If there is 100.000 jobs right now in Bank of America and 30.000 needs to go - then 100.000 are afraid and living like they will lose their job, but when job cuts are done theoretically the 70.000 will start spending again. (The risk being 30.000 jobs become 50 or 60.000 later on)

Q1 2009 circumstantial evidence would suggest there is "plenty of cash" on the sidelines, some of this should be deployed when we go into 2009?

Fed/Treasury plans does work. Unrealistic but let us put it up there. Fed takes rates to zero, start engaging in Investment Grade, they borrow not 3 trillion but 10 trillion of the future earnings of America... and it works!!! Hurrah!!!

I have put our target out before but for now we remain with key predictions of:

S&P500 will see 500.00 in 2009

Yield in Europe & US will go to zero

China growth will be less than 3%

Tension in the EU will increase

Oil goes below 30.00 maybe even 20.00 US dollars

EUR/USD will see both 0.9500 and 1.4000 in 2009?

EMG underperforms everything else...

Credit spreads will continue to widen.....

Investment meeting conclusion: There is some "nervousness" ahead of the FOMC on the text and its implications. It seems unlikely Fed will deliver more clarity if only because they do not have it themselves, but there will the usual: We will do whatever it takes to restart economy....market looking for minimum 50 bps. Meeting could disappoint.

We are still see incoming data being extremely negative, earnings likewise, and there is growing recognition of our own main theme: Unemployment - when this hit the "Street" it could take us down again to new lows.

Yield curve in EU and US huge different. Europe is steepning while US is flattening.

EUR looks stretched.

Equity

Market is historically fairyl priced, but based on forward earnings expensive

Lack of credit remains key issue.

Unemployment will hit earnings and consumptions.

Commodity cycle repricing from recession to depression a negative?

Low low physcology could lift the market.

Commodities

Contango begs for being crude for delivery but no one got balance sheet to do so.

Gold, Silver at breaking point failure would lead to big sell of.

OVERALL

End of the year, we are in wait-and-see mode, however almost as per usual we remain extremely negative on the outlook - believing there have not been a proper pricing of the impact on ACTUAL UNEMPLOYMENT ABOVE 10.0% into stock market and valuations of housing stocks.

There simply is not anything worse the losing your job, except death, and for some people losing their job would be equivalent of that!

When people lose their job everything stops for them. They do not care if stock market goes or down, that Wal-Mart has discount of 50%, that Bernanke talks positively, that the Government wants to help them, they need to be back at work that's it.........

Obama gives us(US) hope, but is it enough, is it too late? I think so - I would love to the positive guy calling for higher markets, lower unemployment, but I am paid to be sceptical, paid to deliver real return (unlike Madoff's)....so for now I will be concerned, more concerned than ever before, but then again, I am merely a poor farmer boy from Denmark.

mandag den 15. december 2008

Watched some good old American football yesterday and Monday morning quaterbacking was certainly part of the speakers "game".......anyway kind of interesting how Bernie Madoff all of the sudden becomes front-line news, not as much because of the size, big as it is at 50 bln. $, but due to the fact no one seemed willing to "call the bluff".....It sad to see "innocent" people getting hurt, but this is really the part of cycle we are.... where EVERYONE who could/should pay pays...

Why did Madoff' game got called? Redemptions! It was not due diligence, it was not financial oversight, it was not even the SEC!

No, everyone thought this was cleaner than clean, despite the performance being a serious anormally not even copied by the great George Soros ......I believe the side-effects from this will be much bigger than market willing to acknowledge as it is another blow to the confidence of ANY FINANCIAL institution - if there is not any any confidence left, what is the "goodwill" on their balance then?

EUR is flying, of course, but we took profit too early as the game continues - I see the weaker US Dollar as the market call on the Ponzi-scheme directed by Bush, Paulson & Bernanke - some nice gentleman from Barclays sales-team claimed today they were doing a good job! I do not know if this was based on him being nervous about keeping his job or his firm believe that offering "public money" for private would work wonders.. ????

EUR is going to get US disease on growth..or lack of it.. but for now we are in a December EUR rally which could easily see 1.3700 and 1.4000 on-route to our tactical call change as of last week....... of 1.5000

Stock market - in broad based consolidation - got feeling with the US Dollar starting to weaken that post FOMC, there could be a price to paid for the stock market, but as some of you have commented maybe I am tooooo negative for my own good. Investment meeting tomorrow... we start @ 90% cash, rest in negative markets positions.....full disclosure tomorrow.

StrategyKeep powder dry to post FOMC - our indicator/model shows increased risk of sell-off as credit spreads continues to expand, short-term fixed income remains bid, US Dollar weakens, and foreign press officers throw shoes after the Prez Bush.........Calling him "a dog" would be considered a compliment for him in the US I guess... ? ;-)

Valuation hard to figure out.....but I am looking forward to the investment meeting and to measure our conservative stance vs. the alternative "normal allocation" in the last week, month and quarter.

Main concern remains the turn-of-the-year in the money markets, and into Q1 my counterpart risk. I got nasty feeling Lehman will not be last major institution to "die"........if the hope connected to Obama does not materilalise soon....this could get ugly....

fredag den 12. december 2008

No one seems to care for 50 bln. $ fraud scandale, no one seems to notice Obama is knee-deep involved in Chicago and that ALL PRESS, ALL WEEKEND will be on him trying to explain away how apperently the 2nd most important man in the US.. the Chief of Staff got involved in Chicago... dodgy politics....

Washington wud not be able to sell a cold Coke in Sahara, but pretends things are good

Jamie Dimon, CEO JP Morgan pretty much tell the world Q4 is TOAST - and that they have serious issue with earnings and potentially capital... but still...market is long hope, hope and hope...

I bid you all a lovely week-end...and will not remind you that 2008 was the year of financial industry insolvency, it seems more and more 2009 will be the year of Consumer/Private insolvency, something much worse at its entails people losing their job.. as Reagan said: A recession is when your neightbour loses his job, a depression is when you lose your job... I am afraid...Depression is now the name of game - the key catalyst being EVERYONE on CNBC USA tells me its impossible.. making it a 99% certainty.........

StrategyLong 90% cash/fixed income - took profit on short cash S&P-500, took profit in the massive move in EURUSD.......took profit in Gold.....still MEGA long puts in STOXX50..... took profit in S&P500 put options (exp next Friday- decay starting to hurt).....and in our Allocation model we are:

All codes are Saxo system codes and number of shares/index based on 1mio EUR.....:

torsdag den 11. december 2008

It is simply frightening the logics behind this Detroit plan – please read this transcript from Nightly Business News – under PBS in the US…….there is no way Detroit can have5-6 pct growth in sales, cut cost by 50% and then maintain solvency….. but…. Politicians more than willing to use 13-15 bln on this --- I remember when 10 bln. US Dollars was a lot of money.. no more…..

We are in process of changing our EURUSD call to 1.5000 by Q1 next year…..here is why:

1. Fed to issue debt? No governance.. must be junior-debt to Treasury? So why? Plus as friend point out: if they issue debt surely there will be CDS on it – meaning direct “credibility measurement of Fed”.. not something I think Bernanke would want.....

2. Treasury Czar (where do this idiotic term come from ?)… listen market: We will issue 1-2 trln. US dollar….. WHAT!!!!!!!

3. Credibility – as much as I think EUROPE going to break-down – I must say I think the US is close to being TOTALLY INSOLVENT……..

4. Yields – interest differentials very negative for US Dollar..

5. GMAC will face Chap. 11 it seems….

6. Money market funds yielding close to zero..and not taking in new money (as it dilutes present holders…)

7. Sentiment – I cannot shake of the feeling the US is only in 2nd inning of double header (Thanks E..)……..

PAUL KANGAS: If GM gets the money, what happens then? And just what is this company worth now, anyway? Good questions. So we decided it was time to get some better answers about what's behind the numbers GM sent to Congress. While Washington debates a bailout, we sent Darren Gersh to get some expert input from outside the beltway.

DARREN GERSH, NIGHTLY BUSINESS REPORT CORRESPONDENT: To test drive GM's financial plan, I went to Dartmouth's Tuck School of Business and asked finance Professor Anant Sundaram to scrub the numbers the auto makers gave Congress. All right professor, so here is GM's term paper. Let's start with what grade would you give it.

ANANT SUNDARAM, FINANCE PROFESSOR, TUCK SCHOOL OF BUSINESS: If this was a term paper in my class, I would have to give it unfortunately, a "C" plus.

GERSH: Ouch.

SUNDARAM: The reason is there is lack of clarity. There is lack of consistency and the data, the methods, the approaches, are just not transparent.

GERSH: So this is kind of an all nighter?

SUNDARAM: Absolutely. Never happens at the Tuck School of Business though, but I have to say it has the feel of an all-nighter that was pulled with a drop dead deadline.

GERSH: In that all-nighter GM apparently left out a cash flow analysis, the gold standard of finance. So Sundaram did some detective work to estimate GM's revenues based on a chart on page 21. You can see all those details on our website, but here's the result.

SUNDARAM: Making certain very favorable assumptions, assumptions favorable to GM, if I were to back out a revenue forecast, essentially tells me that GM is expected to have about $136 billion in revenues in 2009, but they expect these revenues to increase to something in the $160 to $165 billion range by the end of year 2012.

GERSH: OK, so you've got the revenues up there. Now how aggressive is that assumption? How fast do they have revenues growing and have they done that before?

SUNDARAM: This revenue growth implicitly assumes something like 6 to 7 percent in compounded annual growth rate in revenues, which is a little bit on the optimistic side. Actually, if you look at how their revenues have grown in the last five years, it's been less than 1/2 percent per year, in fact closer to a 1/3 of a percent, so we are talking about growth rates being about 15 to 20 times what they have been in the recent past.

GERSH: Sundaram points out GM plans to do that while cutting brands, employees and dealers, but if we assume the company hits that goal, we can put a value on GM. Sundaram cautions it's a rough estimate which compares GM to companies like Toyota and Honda. Bottom line: GM could be worth $50 billion to $80 billion after it has successfully restructured the company in 2012. And using some fancy math that we will spare you, Sundaram adjusts that figure back to get a value for GM today.

SUNDARAM: And essentially under some reasonable judgments one can make about discount rates and so forth for GM, suffice it to say that in today's value, this $50 to $80 billion by the year 2012 will probably be - we're talking about it being somewhere in between $32 billion to $50 billion range.

GERSH: But wait, GM owes banks and investors and its union $66 billion.

SUNDARAM: So if $66 billion were the claims against this company, then what we are saying is the value that is left over for equity holders is negative.

GERSH: Which is why GM is promising Congress it plans to negotiate a deal to cut its debt almost in half. So if you were the bank of Congress, the first amalgamated bank of Uncle Sam and this company comes to you and says, we want $12 to 18 billion? Would you give it to them?

SUNDARAM: I would hesitate to say yes, unless I'm convinced that they can get all the reductions, perhaps a little more than they're hoping for. If I were the car czar that they are thinking of putting in place, the issue that I'd be focused on night and day, 24/7, is the speed at which I can get the liability down to $34 billion or below, i.e. the negotiations with the lenders and labor.

GERSH: Consider those debt restructuring negotiations GM's real final exam, one it must ace to stay in business.

Darren Gersh, NIGHTLY BUSINESS REPORT, Hanover, New Hampshire.

Strategy:

We went long EURUSD @ 1.3098 (stop @ 1.3055 offered), Long Gold @ 816... (stop 793)...and we are short S&P cash @ 899.98... and VERY LONG puts in Stoxx50 and S&P.. into year-end....

I simply do not get this --- still @ 90% cash - with the 10% deployed negatively...

My Chief Economist David Karsbøl has produced short piece on China growth - I remain extremely sceptical of the illussion of 8% even 5% growth in China - a lot of hope is built on China being able to pull demand with it and infrastructure et al... I will be surprised to see 5% growth, even 3% .... I think, unfortunately that China is going to have tough times ahead and as David points out the similarities with the US in the 1920s are more than relevant.

David Karsbøl, Chief Economist, Saxo Bank:

China, China, China. China has been THE story in the past five years. Who would not be invested in a country with minimum 10% growth per year, with a strongly growing consumption (at least sometime in the future), thousands and thousands of new millionaires and a voracious appetite on commodities? Everyone depended on China – both to get a return and to explain how the global growth could and would continue. Everyone wanted to go there, either physically or by investing.

Well, isn’t this exactly how investors were perceiving the United States in 1929 (albeit US growth was only averaging 4% p.a. before 1929, but it was still somewhat higher than in the rest of the world)?

There are more parallels: Both China and the US in 1929 experiences extremely strong growth rates (roaring twenties in the US) for almost a decade, which completely blinded observers. Both have had some of the world’s highest savings and investment rates in their boom periods. Both had significant current account surpluses that they tried to cope with (China by buying US Treasuries, the US by buying gold). Both were trying to uphold pegs to faltering and unsound assets: The US tried to prop up the GBP at a ridiculous rate after the re-peg to gold caused by WW1 inflation and China is now trying to peg to the USD, which despite the newfound strength is still trending lower and will end in catastrophe. For both of the countries and their boom periods, monetary policy was extremely expansive at the same time as the general price levels were flat to only moderately increasing, which led observes to erroneously conclude that monetary policy was “neutral”. Therefore, very big bubbles were allowed to evolve and burst.

In the 1930’s, the US was one of the economies worst hit by the crisis, because their monetary policy was taken to the farthest extremes. Chinese monetary policy has consistently been most extreme among the G20 countries. Over the past 10 years, annual M2 Money Supply growth in China has averaged +16%. That should be very frightening for the eternal China bulls. They will be lucky to see positive growth in the next three years.

onsdag den 10. december 2008

Back in the land of 80% tax and winter depressions..........This does not make sense! I am a simple man by all accounts and I need things to make some kind of sense for me to enter into it, maybe that's why I never become filthy rich or make 200% returns, but somewhere deep in me I need transperency and I am none from the markets or the policy makers:

This morning starts with the Fed wanting to issue bonds- leave aside the fact Fed not authorized to do so, which havent stop them from doing things which is not kosher before, abd focus on the accountability: Who will oversee this? Who is controlling Bernanke ?

Bernanke is doing everything he wants - he feels like having a free option and he is using it - poorly........

Market is on a bullish move and more and more people are joining the ranks of: End of year / Q1 rally ....... Be my guest. I need more than a few days of low volume trading to change my mind.....lets go through a few risk measurements:

3 month T-bill trades below 0.00% -- wow, that's positive news....

VIX is @ 60% - wow, that's low...

Itrax > 1000 -- wow, that's surprisingly low...

Freight rates --- all of them floored-- wow, that's good news, then they can only go up...

Earnings is being down-graded daily - wow, cool, meaning it will go up soon....

I could go on, but clearly all of above is "good" news and I should be buying everything in sight......

Seriously the world is not analog as everyone in the US told me - it's binary: It's either Zero or 1... 1 is the condition in which fiscal policy, monetary policy, tax rebates, central bank BS works and ZERO is a situation where everyone is more concerned about losing their job than anything else....

Unemployment --- (0,1) = 0 --- No one outside Wall Street cares about the stock market - they want to know if they got a job or not. Everything else is irrelevant.

Mortgage rates -- (0,1) = 0 --- Bernanke/Paulson the Dodgy Duo, DD, is busy helping out the banks - no real help to mortgages holders.... AND even with a perfect credit score your JUMBO rate is 10.0%!

Pension return -- (0,1) = 0--- No one ever thought stock market would not go up forever!!!.... and now pretty much ALL public and private pensions are not only underfunded by they are also losing so much that many people needs to extend their retirement age by 2-5 years... nice job administrators..

Refinancing --- (0,1) =0 --- 22% of corporate debt in the US is bank debt (vs 58% for Europe)...meaning 22% of all debt needs to refinanced inside one year - I wish everyone a Merry Christmas on talking to their bank managers on extensions(maybe they can get hair extension instead?)

Balance sheets and real money ability to enter market --- (0,1) = 0 --- I went looking for ONE, just one bank or fund manager, willing and able to arbitrage some of the "free money" away in the fixed income market - I found none -- do you know any? This indicates that despite the rumors of big cash on the sidelines - no one willing to use it...

Hope (0,1) = 1 Major hopes all around - let's hope it works going to Church praying for a better day tomorrow.

Call me bitter, call me negative, call me anything but untill I understand EXACTLY how this Ponzi Scheme of printing money and moving loss' from private to public sector works out - or give me EXIT STRATEGY for the DD.....then I will be most positive guy in the world.....I am getting nervous that my S&P500 in 500 next year is too conservative... but as fortunately for you and the Hopers... I have ZERO PREDICTIVE POWERS.......

Strategy

We moved to 90% cash from 75% in the Investment Meeting yesterday - too much hope out there and too little analysis of facts..... the 10% is employed on negative markets.. we have been scaling short in S&P and Stoxx50 for the last 5% ......

tirsdag den 9. december 2008

My friend Yoshi Fujioka has produced a new macro view - he is always worth reading:

Dear friends,

In the aftermath of the 1929 crash, conscience pushed some Wall Street professionals out of their office windows and the society then saw it as a part of the sorry story, but, in 2008…

Ed Seykota said, “Part of the function of economic downturns is to restore compassion, community and humility - and to support people in migrating to more profitable enterprise. It looks like we might have a way to go.”

Coordinated Governments’ Actions are Helping the Coordinated Attacks by the Big Banks

When the big prime brokers raised the margin to 35% from 15%, the market lost $1 trillion liquidity and was crashed. The big US banks not only get free money (290bp free positive carry vs. 10y UST) but they are now also in control of this market on the downside by manipulating the margin calls and lending amount. Who can say the 35% is the top? Insider trading is no longer illegal.

They may well let the market bounce to 1000 S&P, and then do it again sometime between over the year-end and Q1 2009 pushing the index down to 650 next time. The banks think their existence will always be justified at whatever the cost and they see investors’ and tax payers’ money an easy prey via Paulson and by squeezing the hedge fund industry because central banks are not in control of money, the big private banks are by margin calls, foreclosure and loan amount.

It makes me so mad that Japan, the country I had given up all my hope 29 years ago, again is stupidly contributing $100 billion to the US Treasury controlled IMF, which would only help to promote the US agenda, while the same department killed any chance of creating Asian Monetary Fund. Yes, China is a planned economy and not efficient distributor of resources, but the democratic US government is making more mistakes (the same mistake) more often and it is still expecting different result. So Asia still is my choice of lesser evil.

If this kind of insane transfer and extortion of wealth to the unfit continues when we will have real food, water and natural resource fights in a few years, yes we will have wars if not the second civil war.

But I still hope the people will soon wake up and do the right thing before too late. The US was my second home for 11 years and I know with my own eyes and ears that they are good and capable of doing the right thing.

“That the people have an indubitable, unalienable, and indefeasible right to reform or change their government whenever it be found adverse or inadequate to the purpose of its institution." James Madison

søndag den 7. december 2008

Hope, hope and more hope. The readers of this blog knows what I think about hope - it belongs in Church on Sundays with the other prayers, but sometimes there is so much "pain" that it creates a psychological need for hope.

This is such a time - the frustrations in the US have reached levels which have made the Americans even more irrational than normal. Every single meeting I walked into in New York talked about the "choices being analog" - Analog? It was almost so indoctrinated that I started to believe they all had been brainwashed.

The consensus US story goes like this: (The score 12/13 meetings ):

The political and economic choices are analog - there is no downside to fiscal stimulus and massive printing of momoney... its eithers ZERO or "something"......and it will be something... (bad?)

Obama is a fine young man, who has the abilility to unite the US, and taking them through this crisis. He is rumoured to be more afraid of Speaker Pelosi than the GOP!

The good news is that we are 50% through this crisis (apperently all recessions lasts exactly two years) and stock market always starts to go higher six month before recession is over - ergo: we are one year into the recesison, leaving between now and the next six month to be major rally point.

Fed lies about the outlook (and denies reality) - they are saying unemployment peaks at 7.0% ish, but really believe its 9.0%+ -

The closed circles of Treasury and Fed rallies behind each other like hangers on - or entrourages - there seems lots of room for Larry Summers( 'The women are less intelligent than men' former Harvard President....a former Clinitonite official) and the ever present Mr. Rubin, who despite taking Cititbank to the brink of bankruptcy is still called upon to help the US again - and unfortunately for me, and you, Volcker is merely seen as figurehead - a Statesman not to be heard.

One day, soon, greed will return and the banks will stop asking the Fed or Treasury for more money and start taking risk on themselves.(I did not get how they in the meantime recapitalized the balancesheets?...but I am not one to let facts get in the way).. The only thing missing is the 4.5 mio. unsold homes - but with the printing press working overtime this is only matter of months before the inventory is gone.....

2009 is a lost year, but do not worry it will only make 2010 a much better year......

The corporates in the US is doing great, hence there is no need for worry, it is "only"" the banks and the consumers which are toast ... but hang on.... aren't the corporations selling to those exact two audiences ? Apperently not.....and here I am being told US consumers is 70% of GDP- but it seems that's only when there is tailwind!

The US consumers will never net safe - and here I must agree - they will move from spending more than they have to spending what they earn.... but they will not net safe... I agree, consider the average US smaller to medium sized cities ... they are built for people to consume.The US is built to spend money, it's a Ponzi scheme, where we continue to extract dimes in order to save on service, products and quality. Think about US cars, US food, design..........The US has given up on itself... it has lowered its standard to levels which is really only comparative to an emerging economy. In the middle of its biggest economic crisis I had the worst service EVER in New York, somebody needs to wake up!

Pensions are now down so much it's impacting peoples work, life and future. I met several people seriously concerned about their future - their jobs.. and this is everybody from school teachers to Wall Street types.. they all live like they are going to lose their job...which to me indicated this economy will contract even further.

Friend of mine claims Wall Street will only be 50% of what it is today in one years time - I am sad to say I hope so, there is nothing to be had on Wall Street anymore - business is closed, and the IC, Intellectual Capital, remains focused on creating the consensus' scenarios like the above... maybe it is a good thing Obama creates hope, because if Bonaparte is right he may get the chance to be a leader.

Strategy

Market continues to behave like it thinks this will work. Be my guest - I remain with 910/920 top in S&P which should be used to be maximum short. The sentiment will not change in six or twelve month. I was here in May, now in December its 50% worse.......

onsdag den 3. december 2008

Had series of meeting in New York today and some things has become absolutely clear to me:

1. The incoming Obama will do ANYTHING-- including risking inflation and devaluation of US Dollar to restart economy.....EVERYTHING GOES - and Fed and Treasury agrees on this outlook even holding back their dire forecasts (They believe in +9 % unemployment)

2. The Fed, Treasury policy is driven by Entourage like - self-happy people who has no reality checks - It reminds me of Michael Jackson and his entourage Geithner being MJ....

3. The innner circle.. the entourage has been told to CUT ALL DERIVATIVE RISK before end of Q1 2009 or else.. they will lose their banking license... in other words.. there is going to be some SERIOUS UNWINDING in derivatives, which most likely will drive MARGIN ON FUTURES through the roof (the only leverage vehicle left when O's Dirigisme has left the station )...

4. Finally, there is NO balance sheet capacity left to do deals - in Fixed Incomeland there are so many arbitrage opportunities.. on/off the run 5/10s ... calendar spreads.. but NO ONE..and I mean no one willing to arbitrage it-- indicating to me.. there is massive downside risk and with some important calendar dates coming up.. 8/10 dec.. Jan 20/21..I am unfortunately more than ever convinced more trouble is coming......

tirsdag den 2. december 2008

Yes, it would have been a joke less than three month ago - but seems the crisis bites here - yesterday arriving in New York I had my taxi driver volentarily waiting for me while I checked in at the hotel before going to first meeting !!!!

I lived in New York for more than three years in late 1990s and never got anything but abuse day-in-day out!

Everything is 40/50% off on December 1st! Talk about crisis - and on top of that plenty of buy three pay for two deals ..... I am not the big shopper but this is close to bargain values.....

On the other hand something never change:I was "listening" to three New Yorkers discuss the world affairs and its striking how simple and full of themselves they are - Obama is "accepted" but only due to PC - political correctness - there is terrible jokes and one liners which not even I will commit to papers flying around - I must say all of the sudden I remember why I both hate and love New York.

It is great place to visit and the Americans are at large the nicest people but in a very strange way New Yorkers are the most "narrowminded" people I meet during my travels around the world. They make George from Seinfeld sound and look like a true globetrotter.....:

There is pain here, lots of pain, no one paying school fees, the Wall Street Trophy Wifes are unhappy - there is even rumors they are marrying for looks now! ----imaging sinking so low!

Paulson & Bernanke, aka The Muppet Show, goes on TV yesterday and the market sinks, and I mean sinks as they open their mouths - dealing rooms are "begging" and I mean "begging" them to shut up .........another new low for politicians and policy makers ? Absolutely! Please watch this old video:

Meanwhile in Fixed Income Land - there is massive fight in on- and off the run 10 year notes, the market makers sitting tight(long the papers) while the hedge funds and bond funds sits shorts the deliverable - there is sooooo much cheap, risk free arbritrage available - but NO ONE and I mean no one to do the deals due to lack of balance sheet - there is so big deals to be had that it screams to me that this market is far worse shape than anyone even willing to earn up to...... Fixed income could catapult itself this week - yes even after 6 figures move yesterday.....watch as we move into futures roll.....

Sitting next to senior executive in Pharma on the plane over - he was "desperate" in a positive way - saying there is NO WAY in Hell he could raise new money, but at the same time he was shown better deals than ever in his history as executive, so much so that he had hired senior banker to do his M & A - and that's fortunately the bright light here:

The well managed companies are starting to be shown the good deals - at least outside banking - meanwhile back in banking-land I keep getting pummeled for stating the obvious - banks should and will fail with or without protections from Governments - this is merely 6th inning (there are 9 innings in Baseball) - as my fellow traveler from pharma stated : I am a doctor I believe in evolution, the stronger must survive!

Strategy:Still @ 75% cash/short-term fixed income, and applying the remaining 25% into NEGATIVE market views: short eurchf, short Stoxx50, long Stoxx50 puts, short EURUSD(still), short NZD in options, still down-side in Gold.......

We remain with our S&P500 in 500 and all Westerns world interest rates in ZERO....this is the 5th wave starting - the worst one......I have been on the road extensively last one month and there is only one uniform message: This stinks ........